Export opportunities are knocking

Don’t think in terms of surplus and shortages – produce as much as you can because the African export market beckons.
Issue date : 12 September 2008

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In the old days, many SA AGRICULTURAL products had surplus removal schemes in place. If production exceeded consumption, or the specific control board’s perception of consumption, the board declared a surplus, bought it and exported it at a loss, or in some cases at a reasonable price. In this type of environment, a surplus is a bad thing and to be avoided at all cost.

Many farmers still view production in terms of surpluses and shortages, and think we should produce just enough, or even slightly less, than we need locally. Prices then remain high and presumably everybody’s happy. opposite philosophy is to produce as much as possible and find lucrative markets for it. Grain annually recommends the area farmers should plant to maize, sunflower, wheat and other crops. Their recommendation is largely based on the first philosophy – produce less than we need so that prices can remain high.

This is a sure-fire way to eventually shrink an industry. Industries that are traditional exporters, such as wool and deciduous fruit, attempt to increase export volumes. In the past, fruit exports were managed by the Deciduous Fruit Board and Citrus Exchange. The brand names Cape-and Outspan were well-known in European and other markets. After deregulation, there was a mad rush for export markets and in a single year the good name of fruit was nearly destroyed. Confidence was slowly repaired via stringent quality control.

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Since 2005 the international food supply and demand situation has changed drastically. At the June World Food Summit, United Nations secretary general Ban Ki-moon said world food supply must increase by 50% to meet the growing demand. But world stock levels remain low while food prices remain high. T he fast growth of Asian populations and economies has created extra food demand. China has a population of 1,3 billion with a gross domestic product (GDP) that grows by 11,4% per year. By 2010, the Chinese middle-class will number 250 million – about the same as in the US.

The market for SA food products
The local market has grown substantially over the last decade. The number of people in the middle to higher income groups has increased, as has their average income. percentage of the population in the Living Standards Measure (LSM) 6 to 10 bracket increased from 34% in 2001 to 44% in 2007. Nearly half our total population earns more than R2 400/month and the mean annual household income is estimated at R6 216 (2005/06). As consumers move from lower to higher income groups, they tend to consume more protein and fewer starch-based foods. The growth in protein demand also drives the demand for grain.

There’s also a huge export market beyond our borders. population of the Southern African Development Community is estimated at 210 million, with a total GDP of US6 billion (R1,74 trillion) while 389 million people live in the Common Market for Eastern and Southern Africa (COMESA) with a GDP of US5 billion (R2,12 trillion). Urbanisation changes subsistence farmers, who used to produce their own food, into consumers dependent on mass-produced food. A frican cities grow quickly and seven of the 20 fastest-growing cities are in African countries. Per capita income in Africa also grows quickly. Fastest growth is in Senegal (10,3% a year) followed by Mozambique at 8,5%, Tanzania at 8,1%, Angola at 7,9% and at 7,4%. But agriculture is slow to enter African markets while others reap the benefits. Main street Lusaka is lined with all the well-known retail chains from Shoprite to Debonairs to Pep stores. Asian markets are notoriously difficult to enter, but their growth holds many opportunities for nearby countries like Australia and New Zealand. This leaves the African market to us.

What are the limiting factors?
In spite of the huge potential market, we don’t seem to gain market share quickly enough. large problem is our inability to manage the phytosanitary barriers put in place by importing countries. In the past year, even exports to Zambia were stopped because of a mix-up at government level. Our voluntary ban on exports of animal products to the EU is a well-known example where government’s inability to provide the necessary quality assurances resulted in export restrictions. Lack of cooperation in export markets has also resulted in failed transactions. ’ s agroprocessing industries and farmers will have to change their traditional ways of thinking about exports and realise you can’t export just to get rid of surplus. Exports must be sustainable in the long term.

This means that both the farmer and processor must be able to produce at globally competitive prices. N ew Zealand exports more than 30% of total word trade in dairy products. Even a small country like Kenya has created a successful flower export business. Surely our meat and grain producers can do likewise. Dr Koos Coetzee is an agricultural economist at the MPO. All opinions expressed are his own and do not reflect MPO policy. |fw